- The Washington Times - Monday, May 7, 2001

The International Monetary Fund (IMF) has found another crisis-stricken customer in Argentina, which is in the throes of an economic maelstrom and has turned to the IMF for emergency lending. Argentinas troubles are auspicious because the IMF depends on these types of financial maladies as a pretext for its raison detre.
To be fair, the IMF probably isnt gleeful of other countries problems. But it repeats the same policy mistakes over and over, exacerbating often dire situations. The fund said recently it was prepared to start doling out loans to Argentina provided the government implements tax increases and budget cuts at the same time. But, in wake of the 1997 Asian crisis, the tax hikes the IMF required some governments to implement in exchange for credit curtailed investment and consumer spending in liquidity-starved countries.
Perhaps the biggest drawback to the IMF loan is that it will postpone Argentinas debt restructuring. This is most unfortunate because investors, while taking a risky and high-yielding bet on Argentina, wont have to take a hit despite the countrys alarming financial problems at least for the time being. The Argentine taxpayer, meanwhile, will be responsible for repaying the IMF. In this regard, IMF loans function as a de facto bailout of wealthy investors. This would be particularly true if Argentina eventually uses part of an IMF loan to bail out banks.
Also, the IMF loan to Argentina could motivate future profligacy. Part of the reason Argentina is experiencing financial pain is because it failed to reign in excessive public spending. Once Brazil entered a financial crisis and devalued its currency in 1999, Argentinas export market began to suffer considerably and the government could no longer sustain its excessive spending. So through this loan, the IMF tells Argentina and the rest of the world that a bailout is the reward for overspending.

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